Food inflation means big profits. And maybe we should ask why

Not that this should surprise you, but The Guardian had an in-depth report showing that corporations are glad to use inflation as an excuse to grab more profits, and instead of competing on price to try to grab more market share, they pass those gains off to stockholders.

One widely accepted narrative holds that companies and consumers are sharing in inflationary pain, but a Guardian analysis of top corporations’ financials and earnings calls reveals most are enjoying profit increases even as they pass on costs to customers, many of whom are struggling to afford gas, food, clothing, housing and other basics.

The analysis of Securities and Exchange Commission filings for 100 US corporations found net profits up by a median of 49%, and in one case by as much as 111,000%. Those increases came as companies saddled customers with higher prices and all but ten executed massive stock buyback programs or bumped dividends to enrich investors.

In earnings calls, executives detailed how even as demand and profits rose post-vaccine, they passed on most or all inflationary costs to customers via price increases, and some took the opportunity to add more on top. Margins – the share of sales converted into profits – also improved for the majority of the companies analyzed by the Guardian….

The pandemic, war, supply chain bottlenecks and pricing decisions made in corporate suites have created a “smokescreen”, said Lindsay Owens, executive director of the Groundwork Collaborative, which tracks companies’ profits. That obscures questionable price increases, she added, and allows businesses to be portrayed as “victims”.

“That gray, nebulous area is fertile ground for companies right now, and you hear about it in their earnings calls,” Owens said. “Inflation itself is the opportunity.”

One of the biggest areas Americans are feeling inflation is in food, which has increased by 8.8% over the last 12 months. And while consumers are feeling the strain as a result, it certainly has helped farmers rebound from the dire situation they were in a couple of years ago. The first bailout came with COVID aid programs in 2020, and while those subsidies have faded, base farm incomes have more than doubled in the last 18 months.

But while farmers have gotten big gains, it's gone into fewer hands. Members of Congress have also gotten to the point of asking why this is happening, and whether Big Food has been (ab)using its pricing power in the process, and it was the subject of a big committee hearig in DC last week.

Join us today as Chairman @repdavidscott hosts a hearing titled “An Examination of Price Discrepancies, Transparency, and Alleged Unfair Practices in Cattle Markets”. Follow along here. https://t.co/01DFobUlgM

— House Agriculture Committee (@HouseAgDems) April 27, 2022

“In 1975, 25% of the beef packing industry was controlled by four firms. Today, approximately 85% of the beef packing industry is controlled by four firms.” —Gilles Stockton, cow/calf producer

— American Economic Liberties Project (@econliberties) April 27, 2022

In that meeting, CBS Marketwatch noted that one CEO in particular was making dishonest claims to DC lawmakers.

The data in the Guardian report helps support regulator concerns, as the U.S. Agriculture Committee held a hearing Wednesday with a number of meat producers, including Tyson Foods Inc. TSN, 1.73%, as part of an examination of price discrepancies and alleged unfair practices in cattle markets. And on April 5, the U.S. Senate Budget Committee held a hearing titled, “Corporate profits are soaring as prices rise: Are corporate greed and profiteering fueling inflation?”

In prepared remarks released Tuesday, Tyson Chief Executive Donnie King defended the companies pricing practices by saying Tyson didn’t set prices for either the cattle it buys or the beef its customers buy. “These prices are set by straightforward market forces, namely available supply and demand,” King said.

And yet, Tyson reported in February operating income for the fiscal first-quarter to Jan. 1 that more than doubled to $1.46 billion from $705 million, as revenue grew 23.6% to $12.93 billion. The results were boosted by a 19.6% jump in the average sales price, while cost of goods sold increased 17.6% and volume edged up 0.3%.

In addition, the company returned more than $500 million to its shareholders through the repurchase of $348 million worth of its stock and the payment of $164 million in dividends.

Know who didn’t get $500 million in help? Tyson workers and grocery shoppers!

And this is where low corporate taxes from the GOP’s 2017 Tax Scam really plays in, because it raises the benefits for profiteering due to less of those profits being taxed, which also discourages investment or anything else that might actually improve the economy for everyday people.

This is a good example where stronger regulation and oversight could help slow down the inflation we've been seeing in food (funny how GOPs never talk about this), and it might actually allow for the big gains we've seen in farm income actually reach everyday family producers. Seems like something we could use more exposure about, and hopefully last week's Ag Committee hearing is the sign that long-overdue anti-trust and market-abusing behavior is going to exposed to the benefit of a whole lot more Americans.